Markets are finding it difficult to break out of a range: Ajay Bodke, Prabhudas Lilladher

ET Now: What is your sense, do you think Indian markets have some kind of a stumbling block and currently the scales are clearly tilted in favour of the bulls or the bears?

Ajay Bodke: The markets are finding it difficult to break out of a range and this is in spite of nearly $8 billion of massive inflows from the foreign investors that we have seen in the first two months. The domestic institutions continue to be the net sellers and the retail investors continue to be lacklustre and watching from the sideways. The 2 or 3 issues, one is the government's firm resolve in pushing through diesel deregulation has been taken very positively by the market.

There were many doubting Thomases who believed that the government would not allow the oil companies to increase the prices on a continuous basis but they have lead to rest all these doubting Thomases by allowing the oil companies the freehand as they had said last month to allow price increases. The Oil Minister has said that this will be a continuing feature this such time that the total under recoveries on diesel which currently stand at around Rs 9 are completely wiped out. Why this is important from structural perspective for Indian markets is because if you look at the total under recoveries in fuel will be around 160000 crores for the full year and the NREGA programme of the government is around 28000 to 30000 crores. So in effect, any massive savings say 95000 crores after that 1.6 lakh crores is diesel under recovery.

In next one or two years if that under recovery is brought down to zero, the resources available to the government was pending on both plan expenditure as well as on welfare measures to get a substantial boost and this is the reason why the markets are quite enthused with the government's resolve to tackle head-on the subsidy issue and the second issue also has been the fact that RBI clearly has softened its stance and we are expecting over the next 12 months interest rates to come off by around 50 to 75 basis points.

Also, the massive torrent of liquidity in the global markets this time around has not led to a sharp rise in commodity prices and that spells good news again for India. So, on a medium-term perspective, that is the reason why FIIs are enthused and are pouring in such large amounts of money in the Indian markets. From hereon, one will have to see how the corporate India is able to take advantage of this environment of interest rates coming off, commodity prices remaining benign and the earnings growth profile of the companies going forward will determine the trajectory of the markets but I personally am quite confident that any fall from current levels will be short and shallow.